EDITORIAL: Fee fi fo fum

EDITORIAL: Fee fi fo fum

Fees. No-one wants to pay them, but everyone wants to collect them. Along with running an operation off the smell of an oily rag, "user pays" is the biggest catchcry of the new business model.

With the banking system as a shining light on how a fee-led recovery can be engineered, every industry sector is trying to work out how to make Joe Punter pay for value-adds previously doled out for free.

Looking at the back-flip performed by Tech Pacific last week, you would have to believe Australia's largest IT distributor realised what a terrible mistake it made in introducing its controversial minimum order fees in April last year.

As the elimination of the fee was clearly one of the first orders of business implemented by the new management team, obviously many customers voted with their feet and simply upped stumps and took their business elsewhere when it was introduced. Of course, the move by Tech Pacific was intended to simply change the buying habits of its huge array of reseller partners. Unfortunately for many this was not an option, so instead they simply changed suppliers where possible.

Certainly distributors who maintained their loyalty to smaller customers benefited in the short term. It now remains to be seen whether the sheer variety of product available from Australia's largest distributor will entice these deserters back.

Most probably, many distributors were actually hoping Tech Pacific could make its fee model work. Secretly, they may have wanted to charge their customers for some or all of the costs involved in handling small sales.

They bided their time and were happy to see their customer lists expanding while the experiment played out, but if Tech Pacific could make it work, then I suspect many were ready to follow suit.

It didn't work. Australia is renowned as an economy largely consisting of small and medium businesses. So too is the channel in this country based on the foundation of a vast number of small dealers and independent retailers.

This army of small resellers can't afford to hold a large array of inventory so they need a supply partner that can do that for them while maintaining stock availability as required.

As we all know, the sum of many small bits and pieces can produce a large total. I suspect there was a large total that went missing from Tech Pacific's revenues as the result of its move to make resellers fund the heavy costs of its systems and methodologies, which weree born in much better times.

The appointment of Indian Shailandra Gupta as CEO of Tech Pacific's entire Asia-Pacific operations and Kerry Baillie as Australian managing director marks a significant turning point in the organisation. When Dutch giant Hagemeyer took the reins of an operation effectively founded by now-disgraced Australian Jodee Rich, the business model was rolled out across the rest of the region, in most cases with great success.

While the wheels were falling off in Australia during the last 18 months, the group's Indian and other regional operations grew into prominence. What we are seeing with the departure of predecessors David Arnott and David Cullen is a clear shift of the power-base from Australia to India. The high-cost infrastructure of Australian operations will be rapidly replaced by the lean, mean efficiency of Indian business practices. A renewed customer focus is also sure to emerge. It appears resellers have spoken and been heard.

Most probably Tech Pacific still has the reseller database, vendor partners and sheer volume of business to turn decline back into growth and with any luck, we will hear no more of those nasty fees.

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